Monday, September 29, 2008

Progressive Shock Doctrine

by digby

Now that the Paulson plan is off the table, it's time to start dealing with this like grown-ups. This is a difficult situation. We are a month away from an historic election and the economy is in crisis. And we are going to see some new plans on the table over the next few days that will likely be a big improvement in the substance, but which may very well have to wait until the American people weigh in. Or not.

But if a new plan is to be presented by the Democrats, it means they are going to take ownership of the crisis and they'd better start thinking about passing it with a progressive argument. The Republicans are not going to be on board. I wrote after the debate that I wished Barack had made the point that all of his plans for investing in alternative energy, infrastructure and health care are not only the right thing to do, they are going to be necessary for revitalizing the economy. For several decades now we've been working under the false premise that the only thing the government can do to stimulate the economy in a time of recession is tax cuts. That's just not true. In fact, it is inadequate at times like these, as we are seeing. Action in the way of creating jobs and direct government activism is required.

So, with that in mind, perhaps it's time for them to start thinking like Democrats again --- the old fashioned Roosevelt kind. I received this email from a reader the other day that got me musing on the subject:

1. Naomi Klein's "Shock Doctrine" describes the process that seems to be at play here, but as she points out, there's no reason the same crisis can't be used to promote aggressive progressive policies. This is a historic opportunity to aggressively lobby for a progressive alternative (i.e. a massive Keynesian "emergency" training / public works / social safety net program in the New Deal tradition). You are in a good position to make the argument if you think it is worthwhile.

2. For the first time in many years, the GOP can't fall back on the "virtues of the free market" in debating this. If the market had not failed massively, then no bailout is necessary.

3. For the first time in many years, the GOP can't fall back on the "massive government spending/intervention" complaint in debating this. That complaint applies equally to this plan.

4. The GOP/Wall St.line is that this is as bad as it's gotten since the 30s (the last time Wall St. screwed everyone). This provides a perfect opening for the "worked before / can work again" line for progressive policies that have long been politically impossible.

5. Polls show that many Americans are unsure about the bailout, but those stating an opinion oppose it. Those who are "unsure" are likely primed to oppose this bailout, but think something must be done. It is hard to justify politically giving taxpayer money to the very same people who caused this so they can keep their houses in the Hamptons so that bad effects do not trickle down to average Americans (hence the "it's so very complicated" argument). By comparison, a new New Deal is very palatable to the extent people are convinced something does need to be done.

6. The economics of a bottom-up program are compelling. Certainly at least as compelling as a top-down bailout in terms of protecting Americans from the effects of a severe economic downturn.

7. A new version of the New Deal would create a Democratic majority for years to come. That's why the GOP has fought so hard for so long to dismantle the old New Deal. Democrats could emphasize that this is a temporary, emergency program - just as the Wall St. proposal allegedly is, but after the program's sunset there would be a strong new constituency supportive of extending this (and other progressive programs) and expanding the Democratic base of support.

8. McCain is trying to pose as a populist (and bank on Democrats floating a "compromise" bill he can oppose). Shifting the debate with an actual wholesale alternative puts him in a very difficult position, and at the very least prevents him from scoring cheap political points.

Anyway, the exact mechanisms of the plan aren't the essential thing right now. The point is that this is the single most spectacular moment of failure of the right wing "free market" mythology, and it comes on the heels of a number of other spectacular Republican failures. This is an unprecedented opportunity to aggressively put forward a wholesale progressive alternative to the GOP and stand firm.

Why not?

The first point about Naomi Klein and a progressive shock doctrine is absolutely correct. (See this fascinating interview with Klein by John Amato for a primer on how that works.) In crises, the usual suspects swoop in to take advantage of the situation and leave the average people holding the bag. It's disorienting to see this happen to the biggest economy in the world, but there's really no structural reason why it shouldn't happen to us too. The concept of the doctrine is to be prepared to take advantage of all openings --- and this is an opening.

The Shock Doctrine depends upon complexity. But politics depends on simplicity. The Republicans are relying on the voters' common sense reaction to something that seems to favor the people who caused the problem. It's very hard to argue with that and they might just persuade some people out there that they know who the real enemy is and will smite them --- Big Government and Wall Street. (And in any case, it's the smart move for a party out of power which needs to rebuild itself after being discredited. They can't afford to be associated with this and they know it.)

But the Democrats are failing to take advantage of the complexity of the situation and use simple politics to sell it. They should say that the economy is failing and we need massive government action to solve it. That's what Democrats do in a crisis like this. But they need to make the political message about the Democratic agenda for restoring the economy not about rescuing "the financial system" which nobody understands anyway.

Sure, they need to do something to shore up the financial markets, and some of that means they have to restore confidence which is a kind of psychological parlor game based upon assumptions that nobody can measure in advance. And middle class tax cuts are like candy they just can't seem to resist, so I suppose they have to keep it in there, (although I wish they'd take them off the table at some point because it's self defeating to constantly be saying that everyone is over taxed.) But the Democrats must also make the case that conservative policies creating massive income inequality, starving of the nation's infrastructure, neglect of the health care crisis and ignoring of the immediate need to invest in alternative energy and green jobs (not to mention useless wars) are part of the economic instability we are experiencing --- and addressing those needs is vital to restoring the economy. These aren't just good ideas on the merits, they are necessary for our security.

As my readers know, I believe that the Democrats should make an aggressive argument for progressive policies and liberal principles. I don't mind someone saying they can work with others, but I do object to saying Republicans have good ideas when they don't. The radical policies that have led us to this moment have failed but somebody needs to tell the American people exactly why and offer them a clear alternative. This crisis is an opportunity to spell that out so clearly that there will be no question for a generation that these ideas are as toxic as an adjustable rate mortgage.

The congress is going back to the drawing board. And maybe they'll hammer out another plan. But the political question is who is in the driver's seat this time. Clearly, the country is operating without a president right now --- he has absolutely no juice to get anything done and his administration is so discredited that they can't rally the public. Leadership on this is left to the Democrats. ( Republicans are going to go on strike just like the bankers and leave the whole thing in their hands.) If that's the case, then the Democrats should set forth a real progressive plan --- a New Deal for the 21st century.

Let's have the argument and let the American people decide. If the Democrats win it they will have a mandate for real progressive change in the middle of a crisis that demands it. If they play their cards right they'll end up neutering the failed conservative ideology for a generation, put in place some important and long neglected structural changes and mitigate the worst of this downturn at the same time. There's no reason that the Shock Doctrine can't be used for good.

Let Franklin Roosevelt be our guide. We take for granted now one of his signature political innovations: the idea of an executive "legislative agenda," a specific set of White House proposals, by which the success or failure of a presidency can be judged. FDR's was the first and most spectacular. He understood that the New Deal would pass quickly or it would not pass at all. And so, politically, he yoked Congress' willingness to pass his program without obstruction to Congress' willingness to address the national emergency tout court.